Are Expectations Too High at Oracle?

Enterprise software giant Oracle will report earnings today after the markets close for trading in New York. The consensus of Wall Street analysts calls for Oracle to report per-share earnings of 61 cents on sales that are slightly north of $9 billion.

While it’s true that Oracle has fared better than most of its rivals amid a crash in global IT spending, analyst Brendan Barnicle of Pacific Crest Securities in Portland, Ore., argued in a research note to clients last week that analysts may have set the bar a bit high. He expects EPS of 60 cents and sales of $8.94 billion. “In checks, we heard about more large deals than we have in the recent past. Nevertheless, it is likely that macro uncertainty made it difficult to close all the deals. Therefore, we expect November quarter results generally to be in line to slightly lower than consensus,” he wrote.

On top of that, he thinks the outlook for the quarter ahead is too aggressive, given the state of the world economy. “Oracle has a clear practice of guiding conservatively, and in the current macroenvironment, we expect the same,” Barnicle wrote. With that in mind, he thinks the current consensus that calls for earnings of 66 cents on sales of $9.3 billion is a little too high.

Even so, Barnicle expects mostly positive news from Oracle today. With the shares trading at $32.43 this morning, up more than 26 percent this year, he still thinks there’s room to grow. His price target is $36.

AllThingsD by Writer

AllThingsD.com is a Web site devoted to news, analysis and opinion on technology, the Internet and media. But it is different from other sites in this space. It is a fusion of different media styles, different topics, different formats and different sources. Read more »